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Over the past year, Canada’s economy has outperformed the economies of virtually all the other major industrial countries.

Growth in the Canadian economy has been essentially in line with the expectations set out in the Bank’s January Monetary Policy Report Update.

The global economy has been unfolding largely as expected, and prospects for continued robust growth are quite favourable, especially over the near term.

Two major issues dominate the analysis and policy discussion in this Monetary Policy Report: the nature and extent of the global economic slowdown that began late last year and the consequences of the terrorist attacks in the United States.

This is the second in a series of semi-annual reports designed to increase the transparency and understanding of Canadian monetary policy.

The Canadian economy continues to operate just above its full production capacity, and the near-term outlook for core inflation has moved slightly higher.

This paper introduces and estimates a structural model of the Canadian primary market for government debt. We assess the role of dealer exit in this market as a key reason for increased, yet irregular, customer entry and quantify the benefits of greater customer competition against the costs of higher market volatility.

Since the May Report, the international economic environment has continued to improve. Economic activity abroad grew faster than expected, while inflation in the major economies remained subdued.

How do changes to personal and corporate income tax rates in the United States affect its trading partners? Spillover effects from cuts in the two taxes differ. They are generally small and negative for corporate taxes, but sizable and positive for personal income taxes.

Growth in the global economy began to slow in the fourth quarter of 2007 and the first quarter of 2008. This reflected the effects of the slowdown in the U.S. economy and ongoing dislocations in global financial markets.